Economy, Talking Point

The long, hot summer

Hong Kong at a crossroad as discontent with Beijing hits worrying levels

Hong Kong Chief Executive Leung Chun-ying arrives at the Leaders Retreat during the APEC Summit in Nusa Dua

CY Leung: the BBC calls him “Hong Kong’s unloved leader”

For those who witnessed the handover of Hong Kong on June 30 1997, a whole host of individual incidents linger in the memory. But perhaps the moment that remains etched in the mind of this correspondent was when police officers unclipped their badges just after the stroke of midnight. The insignia of Her Majesty’s government were replaced with the badges of the new administration. Away from all of the hoopla and ceremonial, here was a tangible sign that the era of UK rule had finally drawn to a close after 155 years.

But while each will recall any number of personal experiences from the day, there is one thing that pretty much everyone will remember about that historic event: the weather. Hong Kong was lashed with heavy rain throughout the day. Some Chinese even quipped it was the heavens’ way of saying good riddance to the British.

Seventeen years on and the anniversary of the handover was marked once again by a public holiday this Tuesday. But as residents of the city woke, it was to a thunderstorm warning. That, in its own way, was also apt. Why so? Because a political thunderstorm was planned for later that day. Unfazed by sweltering temperatures and sporadic downpours, hundreds of thousands of Hongkongers marched in protest to the government’s headquarters (organisers put the rally’s size at 510,000, the police at 98,600). On top of that hundreds of students staged an overnight ‘sit-in’ in Central, the territory’s financial hub. This could be a rehearsal for worse disruptions ahead: one organisation has a well-publicised plan to impose gridlock on the city’s business district.

As this makes plain, economic and political grievances have been growing in the former colony. And in recent weeks Beijing may have made them worse…

Why the discontent?

This anniversary was a double one: 30 years earlier Beijing and London signed their Joint Declaration, which agreed that Hong Kong would be handed back to China in 1997. This also stipulated that it would be run according to the principle of ‘one country, two systems’. The territory would continue to operate the English common law legal system, keep its own currency and enjoy existing freedoms of speech. Indeed Hong Kong was given a separate ‘mini constitution’ known as the Basic Law that would guarantee its special status within China until at least 2047.

However, on June 10 this year the sanctity of that special status came into question when Beijing released a white paper on Hong Kong – the first such document to be published since 1997. This stressed the mainland government retained “comprehensive jurisdiction” over the territory and said some people in Hong Kong are “confused” in their understanding of one country, two systems. In spite of the city “enjoying a high degree of autonomy” the white paper reiterated it is subject to Beijing’s oversight.

The white paper had a major impact, unsettling many Hongkongers and indicating that the Basic Law’s rigid system of rights are not guaranteed constitutionally. “The document has sparked fears in the city that the high degree of autonomy Hong Kong enjoys will be undermined,” commented the South China Morning Post.

Two telephone polls conducted by local universities found that Hongkongers’ mistrust of Beijing had hit a record level after the release of the white paper. The Chinese University poll was carried out last week and found that 43.6% of the 813 respondents did not trust China’s central government – the highest proportion since it began the survey in late 2009.

A separate study by the University of Hong Kong – released on Monday – had 33% of the 963 respondents giving a negative appraisal of Beijing’s policies towards Hong Kong. Again, that’s the highest level of dissatisfaction since that survey began in 1999.

Likewise members of the legal profession were aggrieved by the white paper. Last Friday 1,800 lawyers undertook a silent march through the city in defence of Hong Kong’s judicial independence. Among those taking part were eight former chiefs of the Hong Kong Bar Association. The lawyers were disquieted by the messages being sent by the Beijing document, particularly language that described judges as “administrators” and which said they should be “patriotic”.

Why was it issued?

The white paper is thought by many to be a sign that Beijing has become rattled by an organisation calling itself Occupy Central with Love and Peace (though most newspapers shorten its name to the pithier Occupy Central). It wants Hong Kong’s next leader – known as the chief executive – to be elected democratically. (Past chief executive elections have been decided by an elite electorate. This initially comprised 400 Hongkongers, but has since grown to 1,200, with constituents largely representing the business community.)

Impatience with the current process was heightened by the farcical nature of the last election – where the main issue became an illegal structure under candidate Henry Tang’s home (a vast wine cellar, see WiC144). He lost. But CY Leung, who won with 689 votes, was hardly a popular choice either. He has been described by the BBC as “Hong Kong’s unloved leader”.

Hongkongers’ hopes for something better rest with a timetable Beijing had earlier outlined which indicated universal suffrage would be possible by 2017 – the date of the next election.

However, the issue on which China and Occupy Central differ is who should be eligible to stand. Hong Kong’s pro-Beijing politicians want candidates to be picked by a pro-Chinese body, so as to eliminate the likelihood of an unloyal figure getting the post. Occupy Central proposes other criteria – such as allowing anyone to stand who can get 35,000 signatures from local citizens.

In an effort to showcase its democratic credentials Occupy Central recently held an online referendum, offering three options for deciding who should be eligible to run. About 800,000 Hongkongers voted, although the poll was quickly derided by Beijing. China Daily, for example, described it as an “unconstitutional political charade”.

However, there is a belated recognition that the release of the white paper was a tactical error. The SCMP spoke to one of those who drafted it and he admitted it had sent “the wrong message” and that Beijing needed to learn how to communicate with Hong Kong better. The mainland source even conceded the document may have driven more people to vote in the Occupy Central-organised referendum.

What next?

Occupy Central has made clear its goal. It is awaiting the Hong Kong government’s own report on political reform – which is due some time in the third quarter. And if this does not go far enough? The organisation has said it will stage a demonstration of civil disobedience. Or as the SCMP summarises it: “The Occupy movement plans to block streets in Central [the business district] if the government does not deliver a blueprint for the 2017 chief executive election that guarantees voters a genuine choice.”

The possibility that Hong Kong’s financial centre might be gridlocked by angry protesters has many of the city’s business leaders anxious. In June the Hong Kong Monetary Authority (HKMA) requested 55 banks to conduct a drill to make sure lenders have contingency plans should their branches and operations in Central be disrupted.

Last week the big four accounting firms – E&Y, PWC, KPMG and Deloitte – went so far as to buy an ad in the local Chinese newspapers in which they warned against the Occupy Central protest. They said the blockade could have an “adverse and far-reaching impact” on the local legal system, social order and economic development.

Local property tycoons Li Ka-shing, Lee Shau-kee and Peter Woo have all came out and agreed it would be harmful to Hong Kong.

Political turbulence in Hong Kong may already be having an impact on the territory’s economy. Former HKMA boss Joseph Yam speculated in his new book that China’s confidence in the city is eroding, with the result that Beijing now wants to “avoid relying too much on Hong Kong for international financing activities”.

Yam’s fear was subsequently confirmed by Beijing officials. Vice Minister of Finance Wang Baoan warned this week in Beijing that the Occupy Central movement would damage economic development and social stability. “Hong Kong is an important offshore renminbi centre, but the development of the business relies on the stability of its financial environment,” Wang told reporters.

“The renminbi business is a good piece of pie. If you don’t want to eat, this is your choice,” added Guo Jiangwei, of the Chinese central bank’s monetary policy department.

What’s driving the Occupy Central movement?

Ideology is one facet. But many of those who have rallied to its banner are dissatisfied with the way the city has been run for the past 10 years, and by anger at how mainlanders have skewed the economy.

Of course, Hong Kong has never been Thomas Piketty’s idea of an equal society, but the last decade has seen inequality become a more serious issue. That’s because some elements of society have benefited disproportionately from the huge influx of mainland Chinese tourists that have deluged the city. Those that own shops or restaurants or travel businesses have got richer. For others salaries have remained largely stagnant.

Meanwhile home prices and rents have gone up thanks to a property boom – which again has been largely fuelled by rich mainlanders acquiring apartments (and often leaving them empty). Obviously that’s been great for real estate developers and anyone involved with the property sector – as well as for existing owners (who have seen values surge). But it’s also meant that Hong Kong apartments have become completely unaffordable to the vast majority of new buyers.

That explains, writes the New York Times, why “alienation runs highest among the young”. It cites a survey last December by the Hong Kong Transition Project, which showed that dissatisfaction with Beijing’s handling of Hong Kong was highest among those between 21 and 29. In this group 82% described themselves as dissatisfied.

Nor is it just those in their twenties who are angry. For an older (and poorer) segment of society, Hong Kong seems less their city and more a tourist playground for affluent Chinese. Shops catering to mainland wants have been replacing older community outlets at a disorientating rate, oftentimes making daily life less convenient.

These trends have also led to some high-profile clashes between the locals and the visitors (last year there were 41 million ‘visits’ by mainlanders to Hong Kong). Many of these have been detailed in some length in WiC, and typically they involve online criticism of mainlanders’ behaviour, followed by some lively retorts by Chinese netizens. Back in 2012 there was a cross-border spat when Hongkongers began calling Chinese tourists “locusts” (a mainland pundit responded on TV that Hongkongers were “dogs”). Another particularly polarising incident was the photo that went viral of a mainland infant peeing in a Hong Kong street (see WiC235).

An online poll in China – taken at the time of the toddler controversy – had over 100,000 respondents accusing Hong Kongers of prejudice against mainlanders. And when a group of Hongkongers later staged a protest by mimicking toddlers urinating, the Global Times went berserk. “This handful of radicals in Hong Kong remind us of the rampant skinheads and neo-Nazis in Europe,” it fumed.

On a more practical level Hong Kongers wonder if their physical infrastructure – such as the public transport system – can cope with the rising numbers of tourists (on existing forecasts 70 million Chinese will visit in 2017, which is 10 times the Hong Kong population). Concerns on this front have led the Hong Kong government to speak to Beijing about limiting mainland visitors. While no policy has yet been formulated, Chief Executive CY Leung did confirm to media that officials had discussed a proposal to reduce Chinese arrival numbers by 20%. One legislator even suggested a special arrival tax be levied on the mainland Chinese.

Predictably this has drawn a barbed response from China, where it grates that Hongkongers show such ingratitude for their tourist spending as well as disparage the ‘motherland’. Calls to boycott Hong Kong have been widespread. For example, one wrote on Sina Weibo: “Even if they beg me I’m not going”; though perhaps the most succinct response to their compatriots’ attitude was: “Let them starve.”

And again there are divisions in Hong Kong itself. There was panic when retail sales plunged 9.8% in April as mainlanders looked to be staying away or spending less. Shopkeepers came out in opposition to proposals to limit visitor numbers. Li Ka-shing, who controls some of the city’s biggest retailers, urged local people not to oppose individual travellers from the mainland, saying they’d contributed greatly to Hong Kong’s economic growth. He warned against scolding tourists, adding that Hong Kong would be in difficulty without the support of the mainland.

Old concerns, new towns…

A third and related issue that is getting Hongkongers hot under the collar is a vast new property development on the Chinese border. This was first suggested more than a decade ago and is known as the northeastern New Territories ‘new town’ plan.

After many delays and public consultations, the government is now trying to get a preliminary funding plan through Hong Kong’s legislative body to carry out the final surveying of the area.

This has sparked anger among those who will be displaced from their land. Last month a group of about 50 villagers tried storming the legislature building in protest at the plan. The SCMP even reported that the new town funding issue drove many in the affected areas to vote in the Occupy Central referendum, giving a major boost to its turnout.

This is not the first of the government’s big initiatives that has met with stiff resistance. A plan to extend Shenzhen and Guangzhou’s bullet train network to Hong Kong in 2010 also sparked a massive street protest. The contruction of a 50-kilometre bridge linking the territory to Zhuhai and Macau faced repeated legal challenges.

These battles were ideological – those who opposed them were against any project that deepened the territorial links with the mainland.

The same is true this time. By putting new towns in the rural New Territories, which account for more than 80% of Hong Kong’s developable area, the government could tap into a fresh source of land supply. However, many critics see a bigger plan to make Hong Kong’s border with Shenzhen more porous and develop the cities into a megalopolis. This, of course, would again erode Hong Kong’s special status.

One prominent voice who has repeatedly made these claims is media personality Albert Cheng. He and others like him have suggested that the new zone would provide Shenzhen citizens visa-free entry into the new town. “It is clear that the plan in the northeastern New Territories is just the prologue to a long-term full integration of the two cities,” he has written, adding that Hong Kong’s leader CY Leung “has long advocated this integration”.

The government, on the other hand, says the plan is no such thing. Instead it says it will provide 60,000 much-needed new flats, of which 60% will be public housing. It also calculates the new zone – thanks to its proximimity to the border – could create 37,000 jobs.

But given the level of opposition to the plan, Development Secretary Paul Chan has been forced to publish an open letter on the government’s website. In it he wrote: “Following groundless allegations that this project is designed to ‘cede the territory and sell out Hong Kong’ and ‘build for rich, non-permanent Hong Kong residents’, I, together with my colleagues, clarified matters with the public and the Council last year by presenting the facts. Recently, some online media sites have fabricated rumours that this development project aims to remove the Hong Kong’s boundary and allow mainlanders to live in the territory without having to present permits. I solemnly state once again that Kwu Tong North and Fanling North new development areas will be new towns for Hong Kong people. There is absolutely no question of allowing mainlanders to live in Hong Kong under permit-free entry.”

There is a common thread to all the anxieties discussed in this article: a rising fear among Hongkongers that their specially-negotiated status within China is at threat. In a city normally known for its focus on business, this is making elements of society – albeit still the minority – more politically defiant.

That’s making many observers feel ominous. As a former CEO of Sing Tao Daily wrote late last month: “This summer is quite hot. I am afraid something bad will happen.”

For the central government in Beijing, Hong Kong is becoming a conundrum. Indeed, from its perspective, no straightforward compromises are left on the table.

However, the head of the central government’s Hong Kong Liaison Office was keen to play down tensions after this week’s march. And like WiC he opted for a weather metaphor. Zhang Xiaoming told China Daily: “I hope the future of universal suffrage is like the weather today in that after the wind and rain, we can still see the rainbow.”

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